AC2101 S1 2014 Seminar 18 Revenue.pptx

Etc 600k 12 6 construction in progress an inventory

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Unformatted text preview: , revenue is recognized progressively based on the stage of completion 2.  Where outcome can be reliably estimated & current estimates indicate an overall net loss on the project, the entire loss is to be recognized as an expense immediately. 3.  Where outcome cannot be estimated reliably, recognized revenue is limited to the cost incurred (i.e., no profit). An expected loss on the construction contract should be recognised as an expense. 10 FRS11:22,32,36 5 Scenario 1: Current estimates à༎ Overall Profit Illustration 1 - Project A §༊  Contract price = $1m; to be completed in 2 yrs §༊  At end of 20x3 Ø།  Current costs incurred for the year= $600k Ø།  Billings for the year = $400k Ø།  Collections for the year = $300k 11 Journal entries are… *  JE1: Incurrence of costs Dr Construction- in- progress (CIP) $600k In SFP Cr Cash/payable/acc depreciation/ exp. etc. ($600k) 12 6 Construction- In- Progress An inventory account (in statement of financial position) to record a.  all construction costs incurred on the project, and b.  progressive gross profit or total net loss recognized on the project to- date 13 Progress Billings •  JE2: Progress billings Dr Account receivable $400K Cr Progress billings ($400k) In SFP Contra against CIP in SFP 14 7 Progress Billing...
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This document was uploaded on 02/10/2014.

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